Non-Resident Indian or NRI refers to a person of Indian origin staying in a different global location for employment/carrying on business or vocation. They are spread across the world with an estimated population of 40 to 100 million. Most of the NRI populate have migrated to alien countries for better job prospect and future but with the advent of global MNCs (Multinational companies) and implementation of revised foreign policies in India, the NRIs are driven to become a part of this fastest emerging economy.
To encourage this initiation of NRIs to resettle and return back to India, they are granted facilities like maintenance of bank accounts and investments in immovable properties in India. To appreciate the interest of NRIs in India's immovable properties, the government of India has come up with beneficial investment policies for the NRIs. The Reserve Bank of India allows them to acquire, hold, transfer or dispose off land by way of sale or inheritance. Such properties are meant for the purchaser's bonafide residential use and they are purchased through normal banking channels/home loans or NRE and FCNR.
In recent years, India has been witnessing unprecedented growth in the real estate sector fueled by the increased business activity. Real estate development in India is estimated at $12 billion and growing at 30% every year. Though all segments of real estate business such as corporate, retail and residential have been driving this growth, investment in residential property itself constitutes 80% of this sector.
Non-Resident Indians (NRIs) are one of the key contributors to the growth of the real estate industry and considering the immense potential in India, they are likely to step-up the investment in future. The Indian government has considerably eased the restrictions relating to investments by NRIs in house property. There is virtually no restriction or approval required for an NRI to invest in properties in India from funds received in India through normal banking channels or held in Non-Resident External (NRE) account/ Foreign Currency Non-Resident (FCNR) account (B)/ Non-Resident Ordinary (NRO) rupee account. However, investment in agricultural land / plantation property / farm house is currently prohibited. The recurring rental income earned on letting out of property is also freely repatriable.
Consequent to the liberalization in Exchange Control policy and procedures, certain relaxations in the existing regulations and procedures governing the acquisition, holdings, etc. of immovable property in India, have been announced. Immovable property may be a residential house, a residential flat or a plot of residential house. The current position therefore is as under:
1.1. Non-resident Indian holding Indians passport do not require any permission from RBI for acquiring Immovable Property for bona fide residential purposes, as section 31 of FERA 1973 is not applicable to them.
1.2. Non-resident Indians holding Indian passport may pay the purchase consideration either by remittance of funds from abroad through normal banking channels or out of NRO Account or out of NRE Account or out of FCNR Account.
1.3.As per the recent relaxation RBI has granted General Permission to Non-resident Indians holding Foreign Passport (i.e. Foreign Citizens of Indian Origin) to acquire, hold, transfer or dispose of by way of sale or inheritance immovable properties situated in India provided;
1.4. Foreign citizens of Indian origin are however required to declare the properties to RBI within a period of 90 days from the date of purchase in Form IPI 7. The following documents must be submitted along with the declaration.
1.5. Where a Foreign Citizen of Indian origin wishes to acquire a property out of funds held in NRO Account then the aforesaid general permission does not hold and a prior permission from RBI will be required which can be applied for in Form IPI.1.
1.6. Where a Foreign Citizens of Indian origin wishes to acquire a property from the sale proceeds of another property prior permission of RBI is essential and may be obtained by applying in Form IPI I.
1.7. Any number of properties can be acquired by a non-resident Indian regardless of whether they are holding Indian passport provided they are required for bona fide residential purposes.
Below is an overview of the key exchange control regulations that should be considered by NRIs while investing in house property in India:
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